The Pakistan Stock Exchange (PSX) has proposed regulatory changes to clarify the concept of certified individual investors and their ability to trade on the newly-formed Growth Enterprise Market (GEM) board.
The PSX has proposed regulatory changes that will allow it to notify the manner of calculating an accredited individual investor’s eligibility criteria. The proposed modification means that an investor’s self-declaration will suffice as a verified method of trading shares on the GEM board.
The PSX has also proposed another definition of accredited individual investors to allow anyone with shares worth Rs. 5 million or more in their Central Depository Company account at the time of self-declaration to trade on the GEM counter.
The existing restrictions hold brokers responsible for any financial misdeclaration made by investors, which brokers despise. A broker has to honor a transaction by an ineligible investor from its own account by correcting the underlying trade.
The proposed GEM Board modifications are aimed at replacing the requirement of having at least Rs. 5 million in net assets with a total asset worth the same amount. The switch is designed to help brokers check eligibility.
The proposed changes say an ineligible investor who has subscribed to the shares of a GEM-listed company will be allowed a “one-time exit at his/her own risk, without any responsibility at [the] securities broker end”.
Auto marking of all those Accredited Investors would be done in National Clearing and Settlement of NCCPL who participated in the IPO following due process of submitting self-declaration.
The exchange is accepting comments on the proposed modifications until 6 January 2022. Fundamentally, the GEM board is a secondary counter reserved for upcoming businesses with bigger investment and liquidity risks than the main board’s mature stock options. Two firms have been listed on the GEM board so far, with minimal volumes since their initial public offerings near the end of 2021.
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